** SPECIAL EDITION **
On the heels of all the Congressional activity with regard to the Coronavirus, one of the most poignant questions that “our size” colleges and seminaries have is:
“I think we have fewer than 50 employees. Are we required to pay the “New Sick Leave” (up to 2 weeks) and “Expanded Family and Medical Leave Act” (up to 10 weeks) payments to our employees?”
It is a GREAT question. First, the short answer is No – well, maybe. (Notice I tried to stay away from that age-old “it depends”). Your institution would be exempt from the new Sick Leave and the Expanded FMLA rules if you have fewer than 50 employees (small business) when making these payments would jeopardize the viability of the small business as a going concern.
Note that early on the Department of Labor (D.O.L.) guidance seemed to insinuate that every employer with under 500 employees was subject to the “Sick Leave” rules and that the “fewer than 50” exemption only applied to the expanded Family and Medical Leave Act (FMLA) rules.
So, there are two requirements for exemption from the new Sick Leave and expanded FMLA rules in the Families First Coronavirus Relief Act:
1. Fewer than 50 employees;
2. Making these payments would jeopardize the viability of the small business as a going concern.
First, how do we count employees for the 50 employee threshold? The Q&A (Question ) states that, the definition of “employee” is the same as in the Fair Labor Standards Act (FLSA). The link provided is about as clear as fudge ripple ice cream. However, it is apparent that the employee definition here includes, full-time, part-time, and joint employees.
There is not separate guidance for the 50 employee threshold, but we can presume that the methodology would be the same as the 500-employee threshold (at the other end of the FFCRA spectrum). Here’s what Question 2 of the FFCRA Q&A has to say on that matter:
“You have fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States, which includes any State of the United States, the District of Columbia, or any Territory or possession of the United States. In making this determination, you should include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.”
So, if we substitute “50” for “500” in the above, it should give us an understanding of what we are dealing with for FFCRA purposes. Now, please note the phrase, “at the time your employee’s leave is to be taken.” Wow! Does that mean that if we are close to the 50-employee threshold we have do to a calculation every day – or every hour? Hmmm. Let’s not go overboard, but…
Then, the “jeopardy” question comes into view. It is answered by the D.O.L. in Question 58 of the Q&A.
Here’s what the newly expanded Department of Labor “Families First Coronavirus Response Act: Questions and Answers” document establishes the following criteria:
A small business may claim this exemption if an authorized officer of the business has determined that:
1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Now, that raises two more questions:
1. If we apply for any of the CARES Act loans/grants, does that change our determination regarding the three criteria above? Well, at this point we are not sure, but the D.O.L. has said that further guidance (hopefully with that included) will be forthcoming in April. (And, may I add, the D.O.L. has met all of their recent guidance deadlines/projections.)
2. If we qualify for this exemption, what does it say about our “Going Concern” status with regard to GAAP? Oh. Well, that will be between you and your auditor, but the Coronavirus could affect the ability to operate as a going concern for some institutions.
DIRECT FROM: Department of Labor (D.O.L.) “Families First Coronavirus Response Act: Questions and Answers”:
4. If providing child care-related paid sick leave and expanded family and medical leave at my business with fewer than 50 employees would jeopardize the viability of my business as a going concern, how do I take advantage of the small business exemption?
To elect this small business exemption, you should document why your business with fewer than 50 employees meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations.
You should not send any materials to the Department of Labor when seeking a small business exemption for paid sick leave and expanded family and medical leave.
58. When does the small business exemption apply to exclude a small business from the provisions of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act?
An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing paid sick leave and expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:
1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
59. If I am a small business with fewer than 50 employees, am I exempt from the requirements to provide paid sick leave or expanded family and medical leave?
A small business is exempt from certain paid sick leave and expanded family and medical leave requirements if providing an employee such leave would jeopardize the viability of the business as a going concern. This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:
employer employs fewer than 50 employees;
leave is requested because the child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and
an authorized officer of the business has determined that at least one of the three conditions described in Question 58 is satisfied.
The Department encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety.
The excellent – and oft-updated – document, “Families First Coronavirus Response Act: Questions and Answers” may be found at:
One thing to consider is whether your school desires to "qualify" for the exemption for fewer than 50 employees. At the end of the day, analysis might show that the 100% tax credit for payments to workers under the "New Sick Leave" and/or "Expanded FMLA" may be more advantageous financially than just the 50% credit under the "Employee Retention Credit."
Ultimately, all of this is going to have be integrated with our thoughts and decisions with regard to the provisions of the CARES Act (and, potentially, other legislation). Let’s keep learning together as things unfold!